Purplebricks turns red as revenues fall

Revenues in the six months to 31 October fell 7% to £41.3m, while the operating loss came in at £11.1m, compared to a profit of £6.9m a year previously.

The AIM-listed firm posted a loss of £0.8m when compared to last year’s adjusted earnings before interest, tax, depreciation and amortisation of £8.4m.

Vic Darvey, chief executive, said: "The first half was undoubtedly challenging, with the implementation of a major change to our operating model coinciding with the UK property market experiencing a substantial fall in new instructions.

"This dynamic led to a disappointing financial performance, but we are confidence that now have the right levels in place to drive a stronger financial performance going forward."

However, Purplebricks also conceded that since the period end, it has continued to see "significant imbalance" between strong demand and limited supply.

"Although housing supply has increased in January, we expect these market dynamics to continue through the second half of our financial year, which will continue to impact instructions and gross margins," it noted.

"In addition, the comparable performance will be impacted by the expected increase in costs associated with our transition to a fully employed model."

Last month, Purplebricks said it would delay the publication of the interim results, and that it was setting aside as much as £9m after it emerged that its letting business had failed to follow the law protecting tenants’ deposits. The announcement caused the shares to tumble.

Darvey said on Monday: "Our lettings business, while relatively small, has significantly potential. We were disappointed by the process issues that we because aware of in December. These are being corrected, and a root and branch review of the lettings business has been completed in relation to our processes and procedures."

Purplebricks has overhauled its pricing system in recent months and has moved to an employee operating model.